Given you didn't really specify any criteria, I had to vote air cooled. Air cooled systems can be passive, or very close to it without much of a hassle (not sure about the video card, you might be limited to a 5770), and hence can be *very* quiet.

Water cooled systems are a niche, but, for me, an important niche. I want a highly overclocked system that runs very quietly. Water cooling allows this, air does not. I would not recommend water cooling for anyone that doesn't overclock. Its simply not worth it for most people. WC tends to be expensive (unless you go ghetto, but you lose a lot of performance if you do), and most systems just do not produce enough heat. The exception is overclocking (and perhaps insane benchmark systems with tri-SLI 480 gtx's).

From a noise point of view, with water cooling you can go passive (ie no fans), but you always require a pump. Thats really the main difference.... you can get pretty quiet pumps, but again, unless you need water cooling, its not worth it. The exception might be gamer graphics cards -- but there are after market air cooling solutions for most cards which work well.

TL;DR version: You can prise my WC gear from my cold dead fingers... but I wouldn't recommend it for everyone

Air for the kit you've proposed, and assuming a mild/moderate overclock (no overvolting). For example, you can run your 5850 with a T-Rad2 with a 120mm fan @ 750 rpm and a decent passive air cooler relying on case airflow or a slow fan and you'll find it more quiet than a comparable watercooled system. If you went watercooling, you'd run your fans at similar speeds on a rad unless you went passive, and even then you still need fans for case airflow and have the pump to consider.

Your kit is mid range and fairly energy efficient, and unless you're going to overvolt significantly to obtain high sustained overclocks, air will be more quiet.

Saying that, for any powerusers going with high end kit with significant overclocks, watercooling is clearly superior to air for noise.

I too voted air even though I am a dedicated watercooling proponent. In both air and watercooling setups you will have case fans. With air only setups you can minimize or eliminate heatsink fans using the case flow with small enough cases or ducted air etc.

Watercooling systems while removing one fan for the cpu and one fan for the gpu will almost certainly cannabalize the same amount of fans to a radiator. The three options of using that radiator would be external, internal intake, and internal exhaust. I always recommend the internal intake option so you can maximize ambient (usually +1 C over ambient estimated).

So, let us say you have a 3x120 radiator with 120x38 fans using fan control, a water pump, a case with 120x25 fan, and a power supply with 120x25 then you end up with a lot of fans even if running undervolted moves a lot of air which many times exhibits a very low frequency 'whooshing' sound. Without overclocking either system it may be near equal but cost and effort is far higher with watercooling.

Of course, this is my opinion. I also do not normally overclock but do have a stored bios profile for a mid-range cpu/memory overclock. My estimated cost of watercooling was $500. After upgrading my cpu and case I had to buy new tubing but was able to reuse the rest of the components. Cheers.

Thank you for your honest and objective input. TBH this was not quite what i was expecting to hear from WC enthusiasts. But i'm glad i asked. Now i know that i shouldn't necesarily move on to watercooling in my quest to silent computing.

Water is more expensive. It is however better in every other way than air. For performance, and for silence. Performance I'm going to take as obvious, but silence is worth clarifying.

The normal approach to watercooling is to use a pump to move hot water from components to a radiator. This allows you to use a greater surface area for cooling (as heatsinks are limited by the space in the chassis), and generally a large number of slow fans is considered preferable to one faster one. Say, cpu block, pump, triple radiator with three fans on vs a big heatsink. Under these circumstances, air vs water is a hard choice.

However the strength to watercooling is flexibility. There's no reason why you need to have the fans or pump anywhere near you for one thing, a 'radbox' holding these sources of noise and placed in another room is fairly standard. If you don't want any fans at all, it's definitely possible to connect a number of computers to a domestic radiator. Failing that, various people make fanless radiators that are large, but silent.

If you have a big enough reservoir, you don't need any fans. The odd nutter has piped swimming pool water through a computer, this is extremely effective and has no counterpart from air cooling. Others have linked it to underfloor heating. At least one person buried a load of copper pipes in his garden and used that.

Removing the pump is difficult, I'm yet to see a good solution to that. On the bright side, at least a few of them, while soft mounted, appear to be quieter than fans.

The counterargument is that clever use of heatpipes can achieve much the same thing as watercooling without using a pump.

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